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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI RAVISH SOOD & SHRI ARUN KHODPIA
PER RAVISH SOOD, JM: The present appeal filed by the assessee is directed against the order passed by the CIT(Appeals), Bilaspur dated 05.03.2017, which in turn arises from the order passed by the A.O under Sec.143(3) r.w.s 147 of the Income-tax Act, 1961 (for short ‘the Act’) dated 05.02.2015 for assessment year 2008-09. Before us the assessee has assailed the impugned order on the following grounds of appeal:
“1. That the Ld. A.O has grossly erred on facts and in the circumstances of the case and in law in re-opening of the assessment already done u/s 143(3) of the Act, by issuing notice under section 148 of the Income Tax Act, 1961 after the expiry of four years from the end of relevant assessment year and also confirmed by Ld. CIT (A), the same is against the facts & also against the law. 2. That the Ld. A.O has grossly erred on facts and in the circumstances of the case and in law in disallowing claim of depreciation on DAM amounting to Rs 7072.14 Lakhs and also confirmed by Ld. CIT (A), the same is against the facts & also against the law, hence may kindly be deleted. 3. That the Ld. A.O has grossly erred on facts and in the circumstances of the case and in law in disallowing claim of additional depreciation amounting to Rs.12017 Lakhs and confirmed by Ld. CIT (A), the same is against the facts & also against the law, hence may kindly be deleted.
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That the Ld. A.O has grossly erred on facts and in the circumstances of the case and in law in making addition of Rs 122.17 Lakhs to total income by invoking the provisions of section 14A of the Act read with rule 8D and also adding the same to book profit for calculating MAT u/s 115JB of the Income Tax Act, 1961 and same is confirmed by Ld. CIT (A), the same is against the facts & also against the law, hence may kindly be deleted. 5. The appellant reserves its right to add, amend, or alter the grounds of appeals on or before the date: the appeal is finally heard for disposal.” Also the assessee has raised before us the following additional grounds of appeal vide its letter dated 04.03.2022: “1. That without prejudice and in the alternative on the facts and circumstances of the case and in law, the addition in respect of dam is illegal as the said expense/deduction/claim is allowable under section 37 of the Act. 2. That without prejudice, on the facts and circumstances of the case and in law, the claim of the assessee is of Rs.35,36,07,322/- in respect of dam and hence addition of Rs.70,72,14,643/- is wrongly made and is highly excessive and hence cannot be sustained in law.” 2. Succinctly stated, the assessee company which is a subsidiary of Jindal Steel & Power Ltd. (JSPL) had e-filed its return of income for the assessment year 2008-09 on 29.09.2008, declaring an income of Rs. Nil a/w book profit u/s 115JB of Rs. 21,84,91,786/-. The return of income filed by the assesee company was processed as such u/s.143(1) of the Act. Original assessment was thereafter framed by the A.O vide his order passed u/s.143(3) dated 31.12.2010, wherein the income was determined by the AO under the normal provisions at
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a loss of Rs.(-) 45107.71 lac, while for the book profit u/s.115JB was determined at Rs.21,84,91,786/- (i.e as returned). Case of the assessee company was thereafter reopened by the AO under Sec. 147 of the Act. Notice u/s.148(2) of the Act was issued to the assessee after obtaining the approval of the Commissioner of Income-Tax, Bilaspur u/s.151(1) of the Act on 23.08.2013. In compliance, it was requested by the assessee that its original return of income filed u/s.139(1) of the Act on 29.09.2008 may be treated as the return filed in compliance to the notice issued u/s.148 of the Act. Acceding to the request of the assessee, the AO considered the assessee’s original return of income as a return filed in compliance to notice u/s.148 of the Act and issued notice(s) u/ss.143(2) and 142(1) of the Act. Thereafter, the assessee requested for a copy of the “reasons to believe” on the basis of which it’s concluded assessment was reopened u/s.147 of the Act. Copy of the “reasons to believe” were made available by the AO to the assessee on 03.10.2013. Objections were filed by the assessee company as regards the reasons on the basis of which its case was reopened u/s.147 of the Act, which were disposed off by the A.O. Thereafter, the assessee once again raised objections as regards the validity of the
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reopening of its case which too were disposed off by the A.O vide his letter dated 03.11.2014.
Assessment was thereafter framed by the A.O vide order passed u/s.143(3) r.w.s. 147, dated 05.02.2015 determining the income of the assessee company at a loss of Rs. (-)25896.40 lacs after making certain additions/disallowances which are briefly culled out as under: Sr. Particulars Amount No. Disallowance of assessee’s claim of 100% 1. Rs.7072.14 lacs depreciation: a). The assessee company which was engaged in generation of power and its supply had incurred an expenditure of Rs.70,72,14,643/- for constructing water supply Dam & bridge on the river Kurkut after obtaining permission of Water Resources Department of the State Government of Chhattisgarh, for the purpose of continuous water supply in order to facilitate the production of electricity i.e. power. As the Dam/Bridge was exclusively constructed in order to facilitate uninterrupted water supply for the assessee’s power project, therefore, the assessee had capitalized the same in its books of account under the head “building” and treated it as a fixed asset during the year under consideration. It was the claim of the assessee that as depreciation on Dam @100% was claimed on the basis that it was a “building” that was used for water supply project, which in turn was used for the purpose of its business of providing infrastructure facilities u/s.80IA(4)(i) of the Act. Alternatively, it was the claim of the assessee that the expenditure incurred on construction of Dam was even otherwise allowable as a revenue expenditure u/s.37(1) of the Act as it was built for the purpose of continuous supply of water that was drawn for
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its power plant, therefore, its claim for deduction was even otherwise in order. b). However, the aforesaid explanation of the assessee did not find favour with the A.O. The A.O was of the view that as the assessee had built a Dam on a government property and the same was not owned wholly or partly by it, therefore, it did not fulfil the basic criteria for claiming depreciation on the same. Apart from that, it was observed by the A.O that there was no mention of depreciation on Dam in the depreciation rate schedule of the Income-Tax Act. As regards the assessee’s contention that the expenditure incurred towards construction of water supply Dam/Bridges even otherwise was allowable as a revenue expenditure u/s.37(1) of the Act, the same did not find favour with the A.O for two-fold reasons, viz. (i) that the assessee had not claimed the aforesaid expenditure in its Profit& Loss account; and (ii) even otherwise, as the structure of Dam/Bridges by its own nature had long term and enduring benefit, therefore, the expenditure incurred on the construction of the same could not be considered as being in the nature of a revenue expenditure. c). Accordingly, the A.O on the basis of his aforesaid observations disallowed assessee’s claim for deduction of expenditure incurred on construction of water supply Dam/Bridge of Rs.7072.14 lacs. Disallowance of the assessee’s claim for 2. Rs.120.17 crore deduction of additional depreciation: a). The assessee had raised a claim for additional depreciation u/s.32(1)(iia) of the Act of Rs.120.17 crore. b). It was observed by the A.O that the additional depreciation u/s.32(1)(iia) of the Act was applicable to the assessee who was engaged in the business of manufacturing and production of any article or thing or in the business of generation or generation and distribution of power. It was
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observed by the A.O that the benefit of additional depreciation was extended to an assessee who was engaged in the business of generation or generation and distribution of power only w.e.f. A.Y.2013-14. Accordingly, the A.O being of the view that the assessee was not eligible for additional depreciation during the year under consideration before him i.e. A.Y. 2008-09 u/s.32(1)(iia) of the Act, thus, disallowed its claim of Rs.120.17 crore. Disallowance u/s.14A of the Act: 3. Rs.122.17 lacs. a). It was observed by the A.O that though the assessee had made substantial investments in shares and securities, income from which did not form part of its total income, however, it had not offered any suo-motto disallowance u/s.14A of the Act. On being queried, it was the claim of the assessee that no part of the expenditure that was claimed as deduction by it was incurred/ attributable to its investments made in exempt income yielding shares and securities. b). Also, it was the claim of the assessee that as the interest bearing funds i.e. term loans which were sanctioned for its business project had been exclusively used for the purpose for which the funds were sanctioned, therefore, no disallowance of any part of the correlating interest expenditure was called for in its hand. It was also claim of the assessee that as it had infused its temporary surplus funds for making investment in the exempt income yielding shares and securities, therefore, there was no question of disallowing any part of interest expenditure. However, the A.O was not inclined to accept the claim of the assesee that no part of the expenditure so claimed as deduction was attributable for earning of exempt income. Holding a conviction that as the assessee had incurred the expenditure for composite indivisible activities, the A.O was of the view that it was impossible to apportion expenses attributable to the multi-facet activities carried out by the assessee company. Accordingly, the A.O triggered
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the mechanism contemplated under Rule 8D and worked out the disallowance u/s.14A of the Act, viz. (a) disallowance of interest expenditure U/Rule 8D(ii) : Rs.88.31 lacs; and (b) disallowance of administrative expenses U/Rule 8D(iii) : Rs.33.86 lacs. c. Accordingly, the A.O on the basis of his aforesaid deliberations, worked out the disallowance u/s.14A r.w.r 8D at Rs.122.17 lacs.
Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals) but without any success.
The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us.
We have heard the Ld. Authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the ld. AR to drive home his contentions.
Before proceeding any further, we shall first deal with the admissibility of the additional grounds of appeal which have been raised by the assessee appellant before us. On a perusal of the additional grounds of appeal it transpires that the same has two limbs,
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viz. (i). the assesee had assailed the validity of the disallowance of its claim of depreciation on dam/bridge of Rs.70,72,14,643/-, on the ground that the said amount was even otherwise allowable as a revenue expenditure/deduction u/s.37 of the Act; and (ii). that though the assessee had during the year claimed deduction towards depreciation on dam/bridge amounting to Rs.35,36,07,322/-, but the A.O while declining its said claim of deduction had wrongly worked out the addition/disallowance of an amount of Rs.70,72,14,643/-. As the assessee-appellant has by raising the aforesaid additional grounds of appeal sought our indulgence for adjudicating its entitlement for deduction of the expenditure incurred on construction of Dam/Bridges u/s.37 of the Act, which is purely a legal issue that requires looking no further beyond the facts borne on record, therefore, we have no hesitation in admitting the same. Apropos the claim of the assessee that the A.O had wrongly quantified its disallowance of depreciation, the same, too, not requiring any fresh factual verification is herein admitted by us. Our aforesaid view that as the respective additional grounds of appeal raised by the assessee appellant before us involves purely a question of law adjudication of which would require no fresh verification of facts, thus, merits
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admission is supported by the judgment of the Hon’ble Supreme Court in the case of National thermal power Company Limited vs. CIT (1998) 229 ITR 383 (SC).
The Ld. Authorized Representative (for short ‘AR’) for the assessee has assailed before us the validity of the jurisdiction that was assumed by the A.O for reopening the case of the assessee u/s.147 of the Act on multiple grounds, viz. (i).that as the assessment in the case of the assessee was earlier framed by the A.O u/s.143(3) dated 29.09.2008, therefore, reopening of its concluded assessment after expiry of four years from the end of the relevant A.Y. 2008-09 in the absence of any failure on the part of the assessee to disclose fully and truly all materials facts necessary for its assessment for the said year was in clear contravention of the “1st proviso” to section 147 of the Act, and thus, was liable to be struck down on the said count itself; (ii). that as assessee’s case had been reopened merely on the basis of a “change of opinion” of the A.O as against that of his predecessor, therefore, the A.O had wrongly assumed jurisdiction and framed the impugned assessment; (iii). that as the DCIT, Circle-1(1), Bilaspur had at time of recording the “reasons to believe” for reopening the
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assessee’s case u/s. 147 of the Act on 23.08.2013 already obtained approval u/s.151 of the Act from the Commissioner of Income-Tax, Bilaspur vide his letter No. CIT/Bsp/Tech/148/2013-14/524, therefore, he had wrongly assumed jurisdiction for reopening the assessment and framing the impugned assessment vide his order passed u/s 143(3) r.w.s 147, dated 05.02.2015; (iv). that as the A.O had failed to obtain the sanction of the appropriate authority i.e. Commissioner of Income- Tax, Bilaspur u/s.151 of the Act i.e prior to issuance of notice u/s.148 of the Act, therefore, the assessment was liable to be struck down on the said count itself; and (v). that as a the “reasons to believe” on the basis of which the concluded assessment of the assessee was reopened smacks of absence of any independent application of mind by the AO, therefore, the reassessment framed by him on the said count itself could not be sustained and was liable to be vacated.
Apropos the merits of the case the Ld. AR had placed his contentions in order to impress upon us that the respective additions and disallowances made/sustained by the A.O/CIT(Appeals) were even otherwise not maintainable and were liable to be vacated. As
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regards the disallowance made by the A.O u/s.14A of Rs.122.17 lacs, viz. (i) disallowance of interest expenditure U/Rule 8D(2)(ii) : Rs.88.31 lacs; and (ii) disallowance of administrative expenses U/Rule 8D(2)(iii) : Rs.33.86 lacs, it was at the very outset submitted by the Ld. AR that as the A.O had without referring to the accounts of the assessee company and recording his dissatisfaction as regards the assessee’s claim that no part of the expenditure that was claimed by it as a deduction was incurred/attributable to earning of exempt income, had however summarily substituted the same with an amount that was worked out by him by triggering the mechanism contemplated in Rule 8D, therefore, the disallowance so made by him u/s.14A r.w.r. 8D could not be sustained and was liable to be struck down. In support of his aforesaid contention the Ld. AR had relied on the judgments of the Hon’ble Supreme Court in the case of Maxopp investment Ltd vs. CIT (2018) 402 ITR 640 (SC) and that in the case of Godrej & Boyce Manufacturing Co Ltd vs. DCIT (2017) 394 ITR 449 (SC). Also, the Ld. AR had drawn support from the judgment of the Hon’ble High Court of Delhi in the case of Pr. CIT Vs. M/s. Hindustan Clean Energy Ltd., ITA No. 268/2018 dated 05.07.2018. Apart from that, it was submitted by the Ld. AR that as the assessee had during the year
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under consideration earned exempt income of only Rs.30 lacs, therefore, even otherwise the disallowance made by the A.O u/s. 14A of the Act of Rs. 122.17 lac could not be sustained to the said extent.
9.1 Alternatively, it was submitted by the Ld. AR that as the assessee had sufficient self-owned funds of Rs.867 crores which would justifiably explain its investments in the exempt income yielding shares and securities, therefore, no disallowance of any part of interest expenditure was called for in its hands. In order to buttress his aforesaid contention the Ld. AR had taken us through the financial statements of the assessee company at Page 143 of APB. It was further submitted by the Ld. AR that, even otherwise, as the A.O had failed to give a clear finding with reference to the assessee’s accounts as to how the expenditure which was claimed by the assessee to have been incurred in the context of its non-exempt income were related to its exempt income, therefore, the disallowance worked out by him u/s. 14A could not be sustained and on the said count too was liable to be struck down. In order to support his aforesaid contention the Ld. AR had relied on the judgment of the Hon’ble High Court of Bombay in the case of CIT v. Sociedade De Fomento Industrial Pvt. Ltd. (2020)
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429 ITR 358 (Bom). Apart from that, it was submitted by the Ld. AR that only those investments which had yielded exempt income during the year under consideration were to be considered for computing the disallowance of administrative expenses u/s.14A r.w Rule 8D(2)(iii) of the Income-tax Rules, 1962. In order to buttress his aforesaid contention the Ld. AR had drawn support from the order of the “Special Bench” bench of the ITAT, Delhi in the case of ACIT, Circle 17(1) New Delhi Vs. Vireet Investment Pvt. Ltd. (2017) 82 taxmann.com 415 (Del.)(SB). Also, the Ld. AR objecting to the modification of the “book profit” of the assessee company for computing its tax liability u/s.115JB of the Act, had submitted that the computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A read with Rule 8D. In support of his aforesaid contention reliance was placed by the Ld. AR on the order of the ACIT, Circle 17(1) New Delhi Vs.Vireet Investment Pvt Ltd. (2017) 82 taxmann.com 415 (Del)(SB).
9.2 Adverting to the assessee’s entitlement for claim of additional depreciation u/s. 32(1)(iia) of the Act, it was submitted by the Ld. AR
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that as generation of electricity did tantamount to manufacturing /production of an article or thing hence, the assessee was duly entitled for additional depreciation during the year under consideration. Rebutting the view taken by the lower authorities that as additional depreciation in respect of business of generation; or generation and distribution of power was made available on the statute vide the Finance Act 2012 w.e.f A.Y.2013-14, therefore, the assessee was not entitled to claim the same during the year under consideration i.e. A.Y.2008-09 the Ld. AR had relied on the judgment of the Hon’ble High Court of Calcutta in the case of Pr. CIT Vs. Damodar Valley Corporation (2022) 134 taxmann.com 63 (Cal.). Also support was drawn by him from the order of the ITAT, Pune Bench ‘A’ (Third Member) in the case of Giriraj Enterprises Vs. DCIT, Central Circle- 1(1), Pune (2017) 79 taxmann.com 202 (Pune). It was submitted by the Ld. AR that as observed in the aforesaid judicial pronouncements though the aforesaid amendment i.e. applicability of additional depreciation in the case of generation or generation and distribution of power had been made available on the statute vide the Finance Act, 2012 only w.e.f. A.Y.2013-14, but the same only gave impetus to the existing view that as generation of electricity is a manufacturing
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process, therefore, it qualifies for the benefit conferred under section 32(1)(iia) of the Act. Accordingly, on the basis of his aforesaid contentions it was submitted by the Ld. AR that both the lower authorities had grossly erred in law and the facts of the case in declining the assessee’s claim for additional depreciation u/s.32(1)(iia) of the Act. Also, in order to buttress his aforesaid contention the Ld. AR had relied on the judgment of the Hon’ble High Court of Madras in the case of CIT v. Hi Tech Arai Ltd. [2010] 321 ITR 477 (Mad.)
9.3 Adverting to the assessee’s claim for deduction of the expenditure incurred on construction of Dam amounting to Rs.70,72,14,643/-, it was submitted by the Ld. AR that though the amount that was spent on the construction of the dam was an allowable expenditure, however, the assessee while computing its taxable income remaining under a bonafide belief that depreciation was the correct head, had thus claimed deduction u/s.32(1)(iia) of the Act i.e @100%. It was averred by the Ld. AR that though the assessee’s claim for deduction of expenditure incurred on construction of dam was duly allowable u/s.37(1) of the Act i.e. as a revenue expenditure, however, its claim of the same as depreciation @100% would have no
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bearing on its taxability as the claim so raised by the assessee company was revenue neutral. On the basis of his aforesaid contentions, it was averred by the Ld. AR that in case if the assessee’s claim for depreciation was disallowed, then it was certainly allowable as a revenue expenditure u/s.37(1) of the Act. The Ld. AR in order to support his contention that the aforesaid expenditure incurred on construction of dam by the assessee company was an allowable expenditure u/s.37 of the Act had drawn support from the judgment of the Hon’ble High Court of Rajasthan in the case of CIT Vs. Hindustan Zinc Ltd. 322 ITR 478 (Raj). It was submitted by the Ld. AR that in the aforesaid judicial pronouncement the Hon’ble High Court had clearly held that expenditure that was incurred by the assessee towards construction of part of dam that was built by State Government, in as much as it required large quantity of water for day to day operation of its super smelter located near about was allowable as a revenue expenditure. On the basis of his aforesaid contentions, it was submitted by the Ld. AR that though the assessment framed by the A.O for want of valid assumption of jurisdiction could not be sustained in the eyes of law, however, even otherwise the
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additions/disallowances made by him could were liable for being struck down.
Per contra, the Ld. Departmental Representative (for short ‘DR’) relied on the orders of the lower authorities. However, the Ld. DR on being confronted with the claim of the Ld. AR that the reopening of the assessee’s case was in clear violation of the “1st proviso” to section 147 of the Act as there was no failure on its part to disclose fully and truly all material facts which were necessary for its assessment for the year under consideration i.e. A.Y.2008-09, could not rebut the same. The Ld. DR had filed before us his written submissions by referring to which he had drawn support from the judgment of the Hon’ble High Court of Calcutta in the case of Rampuria Industries & Investment Ltd. (2017) 391 ITR 18 (Cal.). It was submitted by the Ld. DR that in its aforesaid judgment the Hon’ble High Court had observed that as the petitioner before them had not pressed its objections that were raised before the A.O and in fact, had allowed the A.O to proceed with the reassessment without insisting for disposal of the objections raised before him, therefore, from its very conduct, it could safely be inferred that he had waived its right to have his objections disposed off; or in
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the alternative had withdrawn its objection to the invocation of Section 148 of the Act. It was further averred by the Ld. DR that as in the present case the assessee had not seriously assailed the validity of its objection to the invocation of Section 148 of the Act by the A.O, therefore, it could safely be concluded that it had in fact withdrawn its objection qua the validity of the reassessment proceedings initiated by the A.O.
As the Ld. AR has assailed before us the validity of the jurisdiction that was assumed by the A.O for reopening of the concluded assessment of the assessee company u/s.147 of the Act, therefore, we shall first deal with the same. Admittedly, it is a matter of fact borne from record that the income of the assessee company was originally assessed by the A.O vide his order passed u/s. 143(3) dated 31.12.2010, Page 86-87 of APB. The case of the assessee was thereafter reopened by the AO vide notice issued u/s.148 of the Act, dated 23.08.2013. As the assessment in the case of the assessee company was originally framed by the A.O vide his order passed u/s.143(3) dated 31.12.2010, therefore, as stated by the Ld. AR and, rightly so, its case could not have been reopened after expiry of four
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years from the end of the relevant assessment year i.e. A.Y.2008-09, except for where its income chargeable to tax had escaped assessment because of either of the two reasons carved out in the “1st proviso” to Sec. 147 of the Act, viz. (i). that there was a failure on the part of the assessee to make a return under section 139 or in response to notice issued under sub-section (1) of section 142 or section 148; or (ii). there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the assessment year under consideration i.e AY 2008-09. Admittedly, it is not the case of the department that the case of the assessee falls within the realm of the first limb of the “1st proviso” of section 147,i.e, for the reason that there had been any failure on its part to make a return under section 139 or in response to notice issued under sub-section (1) of section 142 or section 148. Ostensibly, it is the claim of the department in the reasons forming the very basis for reopening of the concluded assessment of the assessee that the assessee had not fully and truly disclosed the material facts for its assessment. We, thus, in terms of the aforesaid claim of the department confine ourselves to the issue as to whether or not there was any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment
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for the year under consideration.? Undeniably, the concluded assessment of the assessee company for AY 2008-09, as per the mandate of law, could have been validly reopened vide notice issued u/s.148, dated 23.08.2013 i.e beyond a period of four years from the end of the relevant assessment year, if there was failure on the part of the assessee to disclose fully and truly all material facts which were necessary for its assessment for the said year. For adjudicating the aforesaid issue we herein cull out the “reasons to believe” on the basis of which the concluded assessment of the assessee was reopened, as under: “Reasons for the belief that income has escaped Assessment (i) Excess allowance of depreciation: -Assessee, has claimed 100percent deprecation on dam worth of Rs.70,72,14,643/. The DAM was introduced in the second half of the year. However, in the depreciation rate scheduleof IT Act there is no provision of depreciation on dam. Thus depreciation of Rs.35.36 crore (being one half ofRs.70,72,14,643/-) has been allowed excessively. (ii) Disallowance u/s 14A :- Assessee had made substantial investment in shares and securities income from which does not form part of total income. However no expenditure was disallowed in this respect. The disallowance on this account comes to Rs.1.22 crores. The same was remained to be added in the income of the assessee. (iii) Allowance of additional depreciation:- Assessee has claimed additional depreciation of Rs.120.17 crore under section 32(iia) of the Act. The additional depreciation u/s 32(iia) of the Act is applicable to assesses engaged in the business of manufacture/production of any article/thing of in the business of generation or generation & distribution of power. The benefit is extended to the assesses engaged in the generation or generation' and distributionof power w.e.f. A.Yr. 201.3-14.Thus assessee is not eligible for additional. depreciation for the A.Yr 2008-09 even the generation of
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power cannot be equated with the production of article or thing. Thus the sum of Rs. 120.17 crore on this count has allowed excessively. (iv) Irregular disallowance of depreciation for the pre production period (Before September) :- Assessee’s power production had started from 08/12/2017. Still the assessee had claimed depreciation of Rs.2,53,07,658/- on assets which were introduced before commencement of production. Thus one half of the depreciation i.e. Rs.1,26,53,829/- has excessively been allowed. (v) During the earlier assessment proceedings assessee has not fully and truly disclosed the material facts for the assessment. In view of the above, I have reason to believe that income of the assessee has escaped assessment within the meaning of section 147 of the IT Act, 1961. To bring the said amount into tax net, issue of notice u/s.148 is felt necessary. Hon’ble CIT, Bilaspur vide his letter no. CIT/Bsp/Tech/148/2013-14/524 has accorded necessary approval under section 151(1) of the IT Act, 1961 to reopen the case. Accordingly, notice under section 148 is issued. Sd/- (I B Khandel) Deputy Commissioner of Income Tax Circle 1(1), Bilaspur (C.G)” On a careful perusal of the “reasons to believe” that forms the very basis for reopening of the concluded assessment of the assessee, it transpires that the same hinges around four issues, viz. (i) excess allowance of depreciation on dam by the A.O; (ii) failure on the part of the A.O to work out the disallowance u/s.14A; (iii) allowing of additional deprecation u/s.32(1)(iia) by the A.O loosing sight of the fact that the assessee who was engaged in generation or generation and distribution of power was entitled for the same only w.e.f. A.Y.2013-
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14; and (iv) irregular disallowance of depreciation for the pre- production period despite the fact that the assessee’s power production had started from 08.12.2017.
Ostensibly, the A.O had sought to reopen the concluded assessment of the assessee company not on the basis of any fresh material coming to his notice, but on the basis of the same facts that were available on his record at the time of framing the original assessment u/s.143(3), dated 31.12.2010. Admittedly, it is a matter of fact borne from record that the A.O in the “reasons to believe” have stated that the assessee had not fully and truly disclosed the material facts that were necessary for its assessment. But as observed by us hereinabove, the facts are far from what is claimed by the A.O. Case of the assessee had been reopened by the A.O not for any failure on its part to disclose fully and truly all material facts necessary for its assessment for the year under consideration i.e. A.Y.2008-09, but clearly for the reason that he had after perusing the assessment records, held a conviction that certain claims of deduction of the assessee, to his understanding, had wrongly been allowed by his predecessor while framing the regular assessment u/s.143(3), dated
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31.12.2010. Our aforesaid conviction is in fact irrefutably evidenced from a perusal of the reasons that form the very basis for reopening of the assessee’s concluded assessment for the year under consideration, as under:
(i). Excess allowance of depreciation :- 13. As can be gathered from a perusal of the reasons to believe, it transpires that as per the A.O since the Dam was introduced by the assessee in the second half of the year a/w. the fact that in the depreciation rate schedule of the Income-Tax Act there was no provision of depreciation on Dam, thus, depreciation of Rs.35.36 crore (being one half of Rs.70,72,14,643/-) was allowed excessively to the assessee.
13.1 Observation of the AO that the assessee had claimed 100 percent depreciation on dam worth Rs. 70,72,14,643/- is in itself incorrect. On a perusal of the assessee’s audit report in “Form 3CD” – Annexure 2/Annexure 2A, Page 46–47 of APB, it is revealed beyond doubt that the assessee had raised a claim for deduction of depreciation on Dam @50%, for the reason that the same was put to use on 08.12.2007 i.e for less than 180 days (after 03.10.2007). For the sake of clarity the
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relevant extract of the aforesaid Annexure2/Annexure 2A are culled out as under:
13.2 Apropos the AO’s claim that in the depreciation rate schedule of IT Act there is no provision of depreciation on dam, the same, without commenting on the correctness of the said observation of the AO, by
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no means could be brought within the meaning of “failure on the part of the assessee to disclose fully and truly all material facts which were necessary for its assessment for the year under consideration”.
13.3 As can safely be gathered, the aforesaid reason to believe clearly reveals beyond doubt that the alleged escapement of income of the assessee chargeable to tax is not for any failure on its part in disclosing fully and truly all materials facts as regards the aforesaid issue which were necessary for its assessment for the year under consideration. On the contrary, the aforesaid reason reveals two fold aspects, viz. (i). misconceived and incorrect observation of the AO that the assessee company had claimed 100 depreciation on dam worth of Rs. 70,72,14,643/-; and (ii). changed opinion/view of the AO that even otherwise in the depreciation rate schedule of IT Act there was no provision of depreciation on dam. In our considered view neither the aforesaid misconceived and incorrect observation of the AO; nor his changed/new view as regards the entitlement of the assessee for depreciation on dam in absence of any provision of depreciation on dam in the IT Act would by any means fall within the realm of “failure on the part of the assessee to disclose fully and truly all material facts
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which were necessary for its assessment for the year under consideration”, which would have justifiably triggered the applicability of the second limb of the “1st proviso” to Sec. 147 in the case of the assessee before us. At this stage, we may herein observe, that though the AO had referred to the absence of any provision of depreciation on dam in the IT Act, but thereafter he had confined the reopening of the case on the aspect of excessive claim of depreciation on dam, for the solitary reason that the assessee having claimed 100 percent depreciation on dam was allowed excessive depreciation of Rs. 35.36 crore. Be that as it may, as neither of the aforesaid observations of the AO would fall within the meaning of failure on the part of the assessee to fully and truly disclose all material facts which were necessary for its assessment for the year under consideration i.e AY 2008-09, therefore, its case on the aforesaid aspect would not fall within the four corners of the “1st proviso” of Sec. 147 of the Act.
(ii). Disallowance u/s.14A :- 14. As stated by the A.O in his reasons to believe that though the assessee had made substantial investment in shares and securities, income from which did not form part of its total income, but had not
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offered any disallowance of any part of the expenditure, therefore, addition/disallowance of and amount of Rs. 1.22 crore was called for in its hand. Once again, as the assessee had came forth with full and truly disclosure of all material facts as regards its investments in shares and securities a/w a specific claim that no part of the expenditure was attributable to earning of the exempt income, therefore, it can safely be gathered that there was no failure on its part to disclose fully and truly all material facts necessary for its assessment in so far the aforesaid issue was concerned. As the aforesaid observation of the AO would by no means fall within the meaning of “failure on the part of the assessee to fully and truly disclose all material facts which were necessary for its assessment for the year under consideration”, therefore, the “1st proviso” of Sec. 147 of the Act cannot be brought into play in its case.
(iii). Allowance of additional depreciation:- 15. It was observed by the A.O that as the assessee was engaged in the business of generation or generation and distribution of power which was eligible for additional depreciation contemplated in Section 32(1)(iia) of the Act only w.e.f. A.Y.2013-14, therefore, the additional
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depreciation so allowed to him for the year under consideration i.e. A.Y.2008-09 was liable to be disallowed. In our considered view, the aforesaid reason is in itself self-speaking of the fact that though there had been a full and true disclosure of all material facts on the part of the assessee qua the aforesaid issue as were necessary for its assessment, but the AO had on the basis of changed view sought to reassess the assessee on the said count. As the aforesaid view of the AO cannot be brought within the meaning of “failure on the part of the assessee to fully and truly disclose all material facts which were necessary for its assessment for the year under consideration”, thus, the extended time period provided in the “1st proviso” of Sec. 147 i.e beyond a period of four years from the end of the relevant assessment year i.e AY 2008-09 could not have been availed by the AO for reopening the concluded assessment of the assessee company.
(iv). Irregular disallowance of depreciation for pre-production period (before September) :- 16. It has been observed by the A.O that though the assessee’s power production started from 08.12.2007, but it had claimed depreciation on the assets which were introduced before the commencement of production. Accordingly, on the basis of his aforesaid observations,
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the A.O was of the view that one-half of the assessee’s claim for depreciation i.e. Rs.1,26,53,829/- that had excessively been allowed was liable to be withdrawn.
16.1 Ostensibly, the aforesaid reason inter alia forming the basis for reopening the concluded assessment of the assessee by no means can be attributed to any failure on its part to disclose fully and truly all material facts in respect of its aforesaid claim of depreciation, as werenecessary for its assessment. On the contrary, it transpires from a perusal of the Form 3CD – Annexure 2, that the assessee had in its depreciation chart u/s 32 of the Income-tax Act, 1961 (Page 46 of APB) categorically stated by way of a “foot note” as regards the assets shown with an “Op. WDV as on 01.04.2007”, as under : “*Opening Block of Assets have been shown at Gross Value as no depreciation has been claimed in preceding previous year(s) and the company has started its commercial operations during the current year.”
16.2 As the assessee had duly came forth with a full and true disclosure of all material facts as regards the “primary facts” qua the aforesaid issue, and was neither required to disclose the “secondary facts” nor required to give any assistance to the A.O by disclosure of the other facts, and it was for the A.O to decide what inferences were
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to be drawn from the facts before him, therefore, the reopening of the assessee’s case for the aforesaid reason would not be saved by the extended time period contemplated in the “1st proviso” to Sec. 147 of the Act.
Accordingly, in substance, as the concluded assessment of the assessee had not been reopened for any failure on its part to disclose fully and truly all material facts necessary for its assessment for the year under consideration i.e. A.Y. 2008-09, but merely for the reason that as per the A.O certain allowances/deductions had wrongly/excessively been allowed to the assessee, therefore, we are inclined to concur with the claim of the Ld. AR that the case of the assessee had wrongly been reopened beyond the stipulated period contemplated in the “1st proviso” to section 147 of the Act i.e. beyond the period of four years from the end of the relevant assessment year. Our aforesaid view that in absence of any failure on the part of the assessee to fully and truly disclose all material facts necessary for its assessment for the year under consideration, its concluded assessment cannot be reopened beyond a period of four years from the end of the relevant assessment year is supported by the judgments of
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the Hon’ble High Court of Delhi in the case of Pr. CIT Vs. M/s. Superior Films Pvt. Ltd., ITA No.153 of 2020, dated 19.07.2021 (Del) and in the case of CIT Vs. Viniyas Finance & Investment Pvt. Ltd., ITA No.271 of 2012, dated 11.02.2013 (Del). Also, a similar view had been taken by the Hon’ble High Court of Bombay in the case of Ananta Landmark Pvt Ltd. vs Deputy Commissioner of Income-Tax, WP No.2814 of 2019, dated 14.09.2021 (Bom). Further, we find that the Hon’ble Supreme Court in the case of New Delhi Television Ltd. vs Deputy Commissioner of Income Tax, (2020) 116 Taxmann.com 151 (SC) had, inter alia, held that though the assessee is obligated to disclose the “primary facts”, but it is neither required to disclose the “secondary facts” nor required to give any assistance to the A.O by disclosure of the other facts and it is for the A.O to decide what inferences are to be drawn from the facts before him. It was categorically observed by the Hon’ble Apex Court that the extended period of limitation for initiating proceedings under the “1st proviso” to Section 147 of the Act would only get triggered where the assessee had failed to disclose fully and truly all material facts necessary for its assessment.
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As the assessee in the case before us had disclosed all material facts necessary for its assessment, therefore, we are of the considered view that the A.O as per the limitation provided in the “1st proviso” to Sec. 147 was divested of his jurisdiction for reopening the concluded assessment of the assessee beyond a period of four years from the end of the relevant assessment year i.e AY 2008-09. As in the case before us the original assessment was framed by the A.O vide his order passed u/s.143(3), dated 31.12.2010, therefore, in absence of any income of the assessee chargeable to tax having escaped assessment for reason of failure on its part to disclose fully and truly all material facts necessary for its assessment, the A.O, as per the mandate of the ‘1st proviso’ to Sec. 147 of the Act could not have assumed jurisdiction for reopening the concluded assessment of the assessee beyond a period of four years from the end of the assessment year i.e beyond 31.03.2013. We, thus, concur with the claim of the Ld. AR that as the A.O had acted in defiance of the “1st proviso” to Sec. 147 of the Act and had wrongly assumed jurisdiction and reopened the case of the assessee vide notice issued under Sec. 148, dated 23.08.2013 i.e beyond a period of 4 years from the end of the relevant assessment
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year, therefore, the assessment order so passed by him on the said count cannot be sustained and is liable to be struck down.
On the basis of our aforesaid observations, we are of the considered view, that as claimed by the Ld. AR and, rightly so, as there had been no failure on the part of the assessee company to disclose fully and truly all material facts which were necessary for its assessment for the year under consideration i.e. A.Y.2008-09, therefore, the reopening of its concluded assessment de hors satisfaction of the said statutory requirement beyond a period of four years from the end of the relevant assessment year i.e. A.Y.2008-09 vide notice issued u/s.148 dated 23.08.2013 clearly militates against the mandate of the “1st proviso” to section 147 of the Act. As the very assumption of jurisdiction by the A.O for reopening the concluded assessment of the assessee that was originally framed vide order passed u/s.143(3) dated 31.12.2010 smack of want of valid assumption of jurisdiction for framing of the impugned assessment u/s.143(3) r.w.s 147, dated 05.02.2015, therefore, we herein quash the assessment so framed by him. Thus, the Ground of appeal No.1 is allowed in terms of our aforesaid observations.
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As we have quashed the assessment framed by the AO vide his order passed u/s.143(3) r.w.s.147 dated 05.02.2015 for want of valid assumption of jurisdiction by him, therefore, we refrain from adverting to and therein adjudicating other multi-facet contentions that have been advanced by the Ld. AR as regards the validity of the jurisdiction assumed for reopening/framing of assessment by the A.O, as well as those advanced by him as regards the sustainability of the additions/disallowance on merits, which, thus, are left open.
Resultantly, the appeal filed by the assessee is allowed in terms of our aforesaid observations. Order pronounced under rule 34(4) of the Appellate Tribunal Rules, 1963, by placing the details on the notice board.
Sd/- Sd/- ARUN KHODPIA RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायपुर/ RAIPUR ; �दनांक / Dated : 23rd September, 2022 **SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant. 2. ��यथ� / The Respondent. 3. The CIT(Appeals), Bilaspur (C.G) 4. The Pr. CIT, Bilaspur (C.G)
36 Jindal Power Limited Vs. DCIT-1(1) ITA No. 199/RPR/2017
5.�वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण,रायपुर ब�च, रायपुर / DR, ITAT, Raipur Bench, Raipur. गाड� फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // True Copy // �नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, रायपुर / ITAT, Raipur.
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Date 1 Draft dictated on 22.08.2022 Sr.PS/PS 2 Draft placed before author Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr.PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order